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Tag: Castles in the Sand

Castles in the Sand

Governments change; so do taxes

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

There always seems to be something to talk about as it relates to taxes. Tax liability for real estate investors and individual homeowners is continually changing, especially when there is a change in government.

This time is no different.

I’ve written a few times about a 1031 exchange, which is a way to defer the capital gains on the profits from the sale of property by “exchanging” the property. Basically, this allows you to reinvest the proceeds from your original property and subsequently defer the capital gains if another property is purchased within six months of the sale. This tax benefit is, however, only eligible for either investment or second home properties, not for a primary residence.

During the last tax overhaul in 2017, some of the benefits of the 1031 exchange were rolled back. Properties could be exchanged for “like-kind” properties including artwork and valuable collectibles, however, that part of the law was amended to allow for only real estate to be recognized as an exchange.

The 1031 exchange has traditionally been used by corporations, small real estate investors and individuals alike. Real estate investors take the position that exchanges encourage businesses to expand and create jobs. Individuals use the exchange as a way to roll over their second home properties into larger family homes and then pass them on to their heirs without paying the capital gains accrued over the years. In fact, most 1031 exchanges are done by individuals rather than corporations.

Now as part of the Biden administration’s proposed new economic plan there will be a further reduction to the benefits of the 1031 exchanges. The proposal would abolish 1031 exchanges on real estate profits of more than $500,000. This would probably eliminate the benefit to corporations to use the exchanges, but still allow benefits for individuals and small investors. As always, everyone’s tax liability and positions need to be reviewed by professionals in the field.

There is no question that this has been a tax loophole since 1921 and this isn’t the first time the federal government has had its eye on it. I do, however, question how much benefit there will be left for individuals and small investors if the price of properties continues to skyrocket.

And, while we’re talking property values, there was an Emerging Housing Market Index published at the end of April by The WSJ/Realtor.com organization. The index ranks the 300 biggest metro areas in the U.S. based on economic health and lifestyle data, including unemployment rate, wages, commute time and small-business loans.

Out of the top 50 metro areas, the only one in the state of Florida was the North Port-Sarasota-Bradenton region, coming in at number 47. It’s an interesting list to look at if you follow real estate trends and how they may have changed in the past year. Coeur D’Alene in Idaho came in first, followed by Austin, Texas and Springfield, Ohio. The only areas in the northeast were two upstate New York regions – Rochester and Buffalo – and one in New Jersey, in Trenton. The index points to the metro areas where homebuyers are seeking an appreciating housing market and appealing lifestyle with amenities.

Keep your eye on the new proposed economic plan by the federal government. There may be other proposals tucked in the legislation that could affect the real estate market. Also, keep your eye on the emerging markets around the country. COVID-19 has changed many things this past year and real estate is definitely at the forefront. Stay safe.

Castles in the Sand

Home prices, new construction soaring

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It seems like new home construction and home renovations are taking over Manatee County. If you dare to take a ride east of the beach, you’ll run into new construction starting on Cortez Road, then on El Conquistador Parkway, and don’t even ask about Lakewood Ranch and Parrish. Even the new construction and major renovation projects on Anna Maria Island are making the traffic out here worse than in recent years.

There is a lot of construction activity not only here in Florida, where it seems everyone wants to move, but also around the country. This demand is adding to a shortage of lumber and an increase in lumber prices. The National Association of Home Builders reported that there has been an unprecedented spike in lumber prices, adding more than $24,000 to the price of the average new single-family home and $9,000 to the price of a multi-family home.

Basically, there is a shortage of domestic lumber since lumber mills have closed because of COVID-19. There is also a shortage of Canadian lumber because of COVID as well, but also because of a recent United States tariff on imports from Canada. In addition, although builders have increased activity in the past year, they are hampered by shortages of labor as well as all materials – not just lumber.

A deficit of new construction, as well as the continuing shortage of resale properties, has made the U.S. housing market 3.8 million short on single-family homes. This figure was determined by Freddie Mac after a recent analysis. This single-family home shortage is especially damaging for entry-level buyers who can’t keep up with the ever-increasing sale prices and competition from cash buyers.

Across the country, housing prices are climbing at the fastest pace in 15 years. The January average national home price grew 11.2% from last year. The S&P CoreLogic Case-Schiller National Home Price index reported the price growth rate in two major cities in Florida. Tampa’s prices increased 11.9% and Miami increased 10.4% for single-family homes since last year.

We’re certainly not immune to any of this, as you can see from the March sales statistics for Manatee County reported by the Realtor Association of Sarasota and Manatee.

March single-family properties closed 37.8% more than last March. The median sale price was $395,000, up 23.6%, and the average sale price was $536,981, up 37.4%. The median time to contract was nine days, 79.5% less than last year, and the month’s supply of properties is 0.7% months, 79.4% less than last year.

March condos closed 63.7% more than last March. The median sale price was $245,000, up 14% above last year, and the average sale price was $299,824, 19.4% higher than last year. The median time to contract was 19 days, 55.8% less than last year, and the month’s supply of properties was 0.8 months, 81.8% less than last year.

Cash sales were up for both single-family homes and condos – 75.4% for single-family homes and 40.3% for condos. Unfortunately, this makes buyers who require financing less competitive, resulting in a serious negotiating disadvantage.

The Manatee County housing market continues to surpass all pre-pandemic levels for March, according to the Realtor Association of Sarasota and Manatee. They go on to say that half of all single-family homes are closing above list price, and lack of inventory continues to be the biggest challenge to our real estate market.

If the amount of new construction and the soaring sales prices bring a little shiver to your spine, you’re not alone. I spend several days a week wondering where exactly we’re headed; as always, be careful what you wish for. Stay safe.

Castles in the Sand

Foreclosure in the time of COVID-19

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Foreclosure has taken on a whole new meaning this past year. Yes, your home may be in foreclosure or approaching foreclosure because of job loss impacting your financial situation, but you could also apply for forbearance, temporarily suspending your mortgage payments and stopping the foreclosure process. Now that the initial 360-day program for government-backed mortgages is over, there have been extensions to the program and more are ­being proposed.

As of now, the government has extended the moratorium through June. Also, the Consumer Financial Protection Bureau in the early part of April proposed a rule that would prohibit foreclosures through December. They also want to give servicers of the mortgages options to help streamline loan modifications with COVID-related hardships, as well as keeping borrowers informed of their options. The question is: Do moratoriums and extensions really help, or as we start to dig out of COVID and people return to work, are these programs just delaying the inevitable for homeowners and distorting the housing market?

That said, there are millions of homeowners who have benefited from the extension programs and have sought mortgage payment relief or forbearance. According to the data from Black Knight, as of March 2021, approximately 2.6 million homeowners remain in an active forbearance plan. For those and others, the Consumer Financial Protection Bureau (CFPB) has information on its website to help homeowners determine and understand their options.

Some of the options available to homeowners who are ready to begin making their monthly mortgage payments again are:

  • Reinstatement, which allows homeowners to pay any missing amounts all at once.
  • A repayment plan, enabling homeowners to resume making their regular monthly mortgage payment plus an additional portion of the missed amount each month until the missed payments are paid off. Don’t forget that these suspensions were only temporary – the missed mortgage payments still need to be repaid.
  • Payment deferral, for those who are unable to reinstate or who can’t afford a repayment plan but can resume their monthly mortgage payments. This defers any missed payments to the end of the loan term when it is paid off. Interest is not charged on the deferred amounts and is due upon sale of the property.
  • Loan modification, to change the original loan terms, like the interest rate or term of the loan, to permanently change the mortgage and make a homeowner’s monthly mortgage payment more manageable moving forward.

As always, my concern is the overall housing market. Although all of these programs have helped millions of homeowners, I question how they impacted the shortage of homes on the market we’re experiencing now, pushing values up to an unaffordable level for the next generation of buyers. Are homeowners not selling because they have no incentive while they aren’t paying their monthly mortgage in homes they will probably have to eventually sell anyway? With the jobless rate down to 6% from a high of 14.8% and employers having difficulty hiring new staff, in my opinion, it’s time to get the housing market back to normal.

In addition to homeowners, renters have received a fair amount of benefit from the original Cares Act with a 120-day moratorium on evictions, which has also been extended through June. However, homeowners who are also investors and landlords are having big financial issues keeping up with their expenses.

As we in Florida experience a blow-out real estate market, please remember that many homeowners around the country are still finding a way to dig out. The federal government has offered substantial help in this area and now it’s time for homeowners to remember the real meaning of foreclosure. Stay well.

Castles in the Sand

Are we in a boom or a bust?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Happy tax day! Well, maybe not, since tax day has been extended another month. With so much going on in the world and in the country, it’s easy to forget about some things that are traditional and ingrained in our psyche, like April 15 being the most dreaded day on the calendar.

Until a few years ago, April 15 represented a real benefit to homeowners with mortgages. Mortgage interest on primary homes and secondary homes has always been a staple of the real estate industry. Buy a home, take out a mortgage and deduct the interest at the end of the year. However, because of a change in the tax code, deducting mortgage interest may not be as attractive now to homeowners with an increase in the standard deduction and a cap on the deductible amount of mortgage interest.

Believe me, this is not a reason not to purchase a home and take out a mortgage. Mortgage rates are historically low, even if they have ticked up in the last two months. But finding a home to purchase right now will be a challenge with or without a mortgage.

Today’s real estate market is making history every day, breaking records on sales prices and eating up every single property that comes on the market. Are we in a boom, or are we getting ready for a bust? Typically, you could ask five different economists and get five different answers, but most of them now will say that longer-term trends are at play that should keep the housing market hot.

Why is this? For one thing, even with the pandemic on the brink of being over, COVID has forced the workforce to rethink where they live and why they live there. People who moved last year weren’t just thinking of a temporary place to escape during the pandemic, but a real re-evaluation of their lives, and that’s not going to change.

Millennials are also a big influence in the future real estate markets. They are chomping at the bit to buy a home, start families and settle down in a community. But unless their grandparents’ generation finally sells their forever homes, there will be no forever for this generation.

Countries around the globe that are experiencing the same type of housing market have the same worries about the same type of bubble. However, the consensus is that the buying is being driven by real demand rather than speculation, with families looking to upgrade to larger properties in suburban areas as they work more from home.

What’s going on now is the inverse of the previous housing boom in the mid-2000s. At that time, lending standards were downgraded, allowing buyers to purchase properties beyond their means using risky mortgage products.

According to the National Association of Realtors, between 2006 and 2014, about 9.3 million households went through foreclosure, gave up their home to a lender or sold as a distress sale. We are nowhere near that type of activity; in fact, mortgage qualification standards are at the highest they have been in most of our memories. The biggest threat to the housing market now is mortgage rates going up substantially and a serious lack of inventory, which will slow down sales considerably.

At least for this year, you can put off the only thing besides death where you have no choice. As for me, I’m facing it dead on and paying up on April 15, but that’s me – why spend another month thinking about the inevitable? Stay safe.

Castles in the Sand

Cold month, hot market

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

I have always found real estate to be a very exciting profession. What other job allows and encourages you to peek into people’s closets and check out their favorite shampoo? And right now, real estate professionals are super excited, as they should be – just look at these numbers.

There are few words to describe the Sarasota and Manatee housing market, but “sensational” is one of them. According to the Realtor Association of Sarasota and Manatee, closed sales increased year-over-year by 23.6% across the two-county market. So, let’s look at the Manatee County sales for January, also reported by the Realtor Association of Sarasota and Manatee.

Single-family closed sales in January were 25.6% higher than in January of last year. The median sales price was $370,000, up 12.3% (just to review, the median is the midpoint of sales; half the homes sold for more, half for less). Also, $370,000 is the highest median sales price for single-family homes recorded for Manatee County. The average sales price for single-family homes was $510,940, up 21.4% from last January.

The median time to contract single-family homes was 17 days, down from 41 days last year; this means that half the properties available were in contract in more than 17 days and half in less than 17 days. New listings are down 20.9% and the month’s supply of available properties was 1.1 months, down 67.6% from last year.

Condos closed 20.5% more this year than last. The median sales price was $231,000, up 10%, and the average sale price was $284,037 up 19.9%. For condos, the median time to contract was 40 days compared to 50 days last year, and new listings are down 35.8%, with a month’s supply of properties at 1.6 months, down 66%.

If you think Manatee County is getting too difficult to buy in, don’t think that Sarasota is much easier. Single-family home sales increased by 17.9% in Sarasota and condo sales increased by 32.6%. In Sarasota, the median price for single-family homes was $340,004, up 14.9%, and condo prices were up by 9.1% to $302,250. Essentially, whether you’re looking to buy in either Sarasota or Manatee counties, you’re in for a difficult process. The combined inventory including both property types in the two counties declined by 59.9%.

Alex Krumm, president of the Realtor Association of Sarasota and Manatee, had a couple of things to say about the market when the January numbers were released: “Our sales tend to be strong through fall and winter, but what we’re seeing right now is unprecedented. There are far more buyers than sellers, which reinforces the trend of rising prices and competition in our marketplace.”

He goes on: “Waiting to purchase is a mistake right now. Home prices are increasing at an incredible pace with no sign of slowing, and sellers can take advantage of a very favorable climate to fetch good prices and great terms.”

And to add another log on the real estate fire, the Mortgage Bankers Association anticipates home purchase originations will grow to a record level in 2021 and mortgage rates will stay historically low, generating an even more competitive real estate market.

Living on the edge waiting for properties to close can be stressful for real estate professionals in a normal real estate market, but what we’re experiencing now is far from normal. What is stressing out real estate brokers now is finding properties to sell.

I guess plumbers may have less financial stress and are also welcomed in people’s bathrooms, but where’s the excitement there? Stay safe.

Castles in the Sand

Bubble, bubble, toil and trouble

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

If you think Macbeth’s witches had trouble, just wait. If the COVID-19 housing bubble bursts, it could be a replay of 2008.

To be fair, not everyone thinks there is a bubble. Many real estate professionals and economists feel there are plenty of new buyers in the real estate pipeline to keep the market rolling along, not to mention the low interest rates. But where, exactly, are we compared to the housing bubble in 2008 that led to the financial crisis? Well, there are some similar aspects, but a lot of different dynamics as well.

The banking giant UBS claims home prices are outstripping both wages and rents. While home prices have appreciated more than 60% since November 2012, incomes have only appreciated by 20% and rents by 30% over the same time period. However, unlike our previous real estate bubble, this time it is not being fueled by a breakdown in lending practices because of a combination of bad legislation and lender and investor greed.

Once the lending standards by the government-controlled agencies of Fannie Mae and Freddie Mac were downgraded, subprime loans were available to practically anyone. Remember low-doc or no-doc (document) loans as well as low down payment or no down payment loans? The objective at this time was a quality-of-life issue and getting people in a home of their own, which was a nice thing but a bad business decision. It opened the doors for homeowners with no skin in the game buying homes as well as investors just taking advantage of the situation.

Thankfully, that is not happening now. In fact, the lending standards have been extensively upgraded, making it difficult for homeowners without cash, jobs and good credit to get financing. This doesn’t mean we still don’t have a problem primarily with inventory. There are millions of millennials living with their families, unable to get out on their own, who will be looking for homes when the COVID dust settles and their careers get in gear.

This is why real estate professionals and economists still feel that long-term real estate will be a good investment; even if this bubble bursts there is something there to replace it. Until the Federal Reserve slows down their bond-buying, the interest rates will stay low, keeping the prices on properties high, and there has been no indication of the Federal Reserve reversing their policies any time soon. It’s possible to continue seeing 10% to 15% appreciation rates across the country. Although homeowners love to see this, it can’t be sustainable and definitely is not advantageous for helping those millennials to get out of their parents’ homes.

We do have one other potential bubble to worry about, and that’s homeowners who have taken advantage of the mortgage-relief programs the government put in place to help during the pandemic. These people are facing an end to the programs within a few months and many of them are not back to work or have totally lost their jobs. This is another important phase of the real estate market to pay attention to.

We are still in the midst of a powerful pandemic with millions of Americans out of work but in spite of this there is a real estate boom the likes of which we haven’t seen in 15 years. Bubbles come and bubbles go, and we can only hope we can navigate this one with more wisdom than the last. It seems there’s a Shakespeare verse for almost every part of modern life; now that’s real wisdom. Stay safe.

Castles in the Sand

Real estate outside the box

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

The first time I heard the expression, “think outside of the box,” was in a real estate seminar when I first moved to Florida. It’s a thought process that can be applied to almost anything in life, from romance to home renovations. But in the real estate market we’re currently in, it has a whole different meaning.

Buyers are in the most challenging real estate market in decades. The severe shortage of inventory is pushing sale prices so far up that many buyers ultimately get eliminated. Even buyers who are well qualified to purchase at higher prices are being outbid on multiple home offers. With the competition fierce, every buyer is looking for an edge, and some are very creative.

Not too many years ago, buyers who wanted to take that extra step in enhancing their offer would write a personal letter to the seller complimenting their lovely home and making their case for why this is the perfect fit for them and their family. Well, not anymore. Now, buyers are structuring clever ways to make their offers more appealing to sellers. Sometimes, this creativity is sparked by memorabilia around the home or other subtle indications of the sellers’ personalities. Buyers have used videos, a promise of donations to favorite charities and even offers with a numeric sequence that will appeal to the seller.

Is any of this worth a try? Maybe – appealing to individual egos and sentimentality can’t hurt. But it still all boils down to money, and no matter how you dress up your offer, unless it’s competitive in price and terms, chances are it won’t make a difference.

Speaking of money, our hot market is spurring a number of bidding wars all around the country. Ken Johnson, a real estate economist at Florida Atlantic University, warns getting caught up in a bidding war and buying at the top of the unusual market we are currently in could be a mistake, especially if your purchase is not a long-term investment.

However, most real estate professionals believe this seller’s market still has a long way to go, assuming interest rates stay down, which is predicted based on signs from the Federal Reserve. Most economists believe long-term shortages will continue, but even if inventory starts to go up as the virus stabilizes, there is still plenty of pent-up buying energy to sustain the market for a long time.

Nevertheless, trying to win in a bidding war takes a lot of due diligence to verify your over-asking offer is the right thing to do. Study up on recent sales and potential changes to the area and calculate how much work the home will need; it is easy to get taken over by the frenzy.

On the other hand, if you’re stepping back from improving your offer because you think the house may come back on the market, think again. There is not too much of that happening, especially since there is an abundance of cash offers. The Manatee County sales statistics for December showed an increase of 44.1% in cash offers for single-family homes from last year and 19.5% for condo sales. So, if your hope is that the property will not appraise for mortgaging purposes because there aren’t comparable properties available, you will probably be disappointed.

Real estate buying is all about finding the right balance. Do not be afraid to walk away if a particular property isn’t working for you. Sometimes you have to kiss a lot of frogs before one turns into a prince. Outside the box thinking has never been so important. Stay safe.

Castles in the Sand

New construction surges

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Practically every week there is a trend in the real estate market directly related to the COVID-19 pandemic. The health crisis has taken over every aspect of our lives, but it appears that housing and real estate values have been especially impacted. The latest effect is the shortage of building lots to meet the demand for new construction.

The U.S. Commerce Department has reported that new home sales rose 19.1% in volume in the first 11 months of 2020 compared with the same period in 2019. Even little Cortez has been affected, with two lots sold and one currently on the market in the past six months per realtor.com.

With the shortage of previously-owned homes on the market, record low interest rates and the desire for more space during the pandemic, builders are running out of land. Some builders are limiting the number of sales they put in contract, worried they won’t have enough buildable land to start construction on. Land development is a long and expensive process that involves permitting and infrastructure planning long before a shovel goes in the ground.

This demand is also likely having an impact on green buildings according to the American Institute of Architects. Their goal was to hit “net zero” construction by 2030, however, they have a long way to go and few of their members are meeting their goal. The majority of people just aren’t asking for green construction.

To complicate the new construction industry further, investors – sometimes partnering with builders – are building tens of thousands of houses expressly to rent. Their bet is that the housing culture has changed enough this past year with individuals and families embracing suburban living to keep the demand for single-family homes increasing.

In addition, because of the demand for single-family homes, prices have soared, and in spite of low mortgage rates, availability is unaffordable for many. It’s projected that newly-constructed homes sold straight to investors will exceed 5% over the next few years, up from the historical average of approximately 1%.

When I went online at the Realtor Association of Sarasota and Manatee’s website so I could report on the December sales statistics, the first thing I saw was “single-family homes flying off the market in Sarasota and Manatee.” So here are the numbers on homes in flight.

Sales of single-family homes were up 41.6% from last December. The median sales price was up 6.8% to $357,900 and the average sale price was up 14.5% to $496,984. The median time to contract was 60 days, down 33.3%, and the month’s supply of homes is 1.5 months, down 54.4%.

Condo sales were up 45.1% from last December. The median sales price was up 19.5% to $239,000 and the average sales price was up 52.4% to $365,012. The median time to contract was 26 days, down 43.5%, and the month’s supply of condos is two months, down 51.2%.

According to the Realtor Association of Sarasota and Manatee’s president, “This is one of those weird moments when it’s a great time to sell, but it’s also a great time to buy. If this trend continues, and data is showing that to be the likeliest forecast, then sellers can get top dollar in record short timeframes, while buyers can lock in record low interest rates and buy a home that is going to be worth much more in a year from now. And if they do both, then they can get the best of both worlds.”

The best of both worlds doesn’t come along very often; enjoy while you can. Stay safe.

Castles in the Sand

Move over and make room, there’s more coming

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

As if the COVID-19 pandemic and political unrest last year and, of course, going into this year, aren’t enough, the Census Bureau started reporting population counts and Florida is one of the states at the top of the heap.

Florida’s population has been growing for the last 10 years, making us the third-most-populous state in the country after California and Texas. Coming from New York, I’m always surprised to hear from friends and relatives that they had no clue Florida’s population surpassed New York State’s. This occurred back in 2014 with a slight margin that has grown every year since then.

According to the U.S. Census Bureau, Texas, Florida, California, North Carolina and Arizona were the states with the biggest population growth from 2010 to 2020. Florida’s gain during that period is just under 3 million residents. The states with the biggest declines during the past 10 years are Vermont, Connecticut, New York, West Virginia and Illinois.

These numbers, however, do not reflect the mostly coastal states and Illinois that have lost population from July 2019 to July 2020. Much of this decline may be contributed to the pandemic but chances are the numbers will decline even more when the balance of 2020 is counted, when people started relocating. In addition, Texas (373,965), Florida (241,256) and Arizona (129,556) are the top three states in the country that have gained population this year.

It’s no surprise to anyone who is even remotely interested in the real estate market that people are leaving high-taxed states and embracing Florida’s low-tax and friendly business environment. This year the number of people relocating to Florida from other states has exploded and now many companies are looking to Florida and Texas to relocate their businesses.

After almost a year of running businesses remotely, corporations are starting to understand they don’t need the expense and inconvenience of a bricks-and-mortar building to operate. They can offer their employees alternatives increasing both their bottom line and that of the company. Miami, in particular, is attracting major financial investment companies, a few of which have already relocated and others considering the move.

As previously stated, COVID-19 is certainly playing a big part in the movement of populations. But a lot of this started after the 2017 tax reform, which included a cap on state and local tax deductibility on federal income taxes. States with high personal income tax and exorbitant property taxes that could no longer be fully deducted had residents sharpening their pencils at tax time. Many upper-income families decided it just wasn’t worth the taxes they paid to stay in certain states and started looking elsewhere.

With a new administration in Washington, it’s possible that the tax reforms of 2017 could be reversed. This could have somewhat of an effect on people’s decisions to move, however, paying $30,000 a year in property tax is not the same as being able to take a tax deduction on that amount. So, the real estate community will wait and see if a different national tax environment changes the movement of populations to the sunbelt, which started well before the tax reforms of 2017.

Florida frequently is the subject of jokes from more sophisticated regions of the country. Dave Barry wrote a whole book about it. But based on the 10-year population growth, no one really cares. I-10 and I-95 are jam-packed with moving trucks headed south and properties are selling in one day.

Make room Floridians – we ain’t seen nothing yet. Stay safe.

More Castles in the Sand:

New year, new homes

Are home sales starting to slip?

Real estate sales surge continues

Castles in the Sand

New year, new homes

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s the second week of the new year and it’s probably a good time to outline how homeownership has changed, not just during the past year, but beyond. Design space has had a surprising shift and lifestyle an even bigger one, all resulting in a subtle revolution in housing.

For starters, the demand for larger homes in 2020 has built on the desire to live in more space than ever before in our country. The average home built in the early 1950s was the hard-to-believe number of about 950 square feet. By 2017, the average new home size had almost tripled to 2,700 square feet, and when the analysis of 2020 new home building is done, we will certainly see that number go up as well.

Single homeowners and single women homeowners have changed a lot since the 1950s, when the vast majority of homes were owned by married couples. Today, almost 40% of homeowners are single, and today, a single woman is about twice as likely to buy a home as a single man. Here again, 2020 could increase those numbers too.

The really big financial change from 1950 is that about 60% of homes then were owned outright and only 40% carried mortgages. Today that ratio is reversed, and with the current extremely low mortgage rates, homeowners with mortgages will probably increase even more.

The COVID-19 pandemic and lockdown jolted our lives, locked us in our homes and drove us out of the big cities. So, what’s next? Chances are, probably more of the same. Working from home, schooling from home, cooking from home and moving to the country and suburbs to give our families space has changed our housing needs.

The ubiquitous open floor plan concept has been the dominant home design for decades, and if the pandemic hadn’t change our lives, would probably have continued for several decades more. However, the necessity of home offices, areas for schooling children and just the plain old need for privacy has changed.

Everything from city apartment dwellers using movable bookcases to provide refuge spaces to the popularity of dens and adult studies have been carved out of the open floor plan. And with the new-found experiences of learning and working virtually only exploding in the future, it’s likely that protected niches and nooks will take over soaring ceilings and bowling alley-size living space.

According to a recent article in the Wall Street Journal, home decorating for the new year also has some changes ahead, keeping the psychology of cozy is better and less is more. White, sterile-looking bathrooms are out being replaced by a softer, more natural look. Open-air showers are bringing us back to nature and out of the hustle-bustle of cities. Glitz in fabric and design schemes are out but soft fabrics that are touchable like velvet and mohair are in. Open shelving in kitchens is – thank goodness – out. Neat kitchens that people actually cook in are in, with seamless façade cabinets eliminating hardware. Smart kitchen faucets that are not only hands-free but respond to voice commands are in. Paint colors are also going through a reset, with deep green, blue and gray evoking calmness, replacing white. And finally, true farmhouse décor with barn door sliders is out, replaced with a modified version, less barn, more user-friendly.

Men don’t wear ties to mow the lawn like they did in the 50s and most women don’t own frilly aprons and prepare dinner in pearls, but much of our 50s experience is returning. Homes with yards, do-it-yourself home projects and cooking family meals is a good thing. As the new year unfolds, there will be plenty more changes to our culture and lifestyle influenced by the COVID-19 pandemic. We’re almost there; stay safe.

Castles in the Sand

Are home sales starting to slip?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

It’s a new year and signs are pointing to the possibility that there may also be a new real estate market. We have been enjoying a high number of sales and increasing sales prices for practically all of 2020, but we may be starting to see a slight crack in the market.

According to the National Association of Realtors, November national home sales have started to slip. Nationally, existing home sales in November fell 2.5% from October for the first time in six months. Manatee County also saw a decline in the number of closed sales in November from October of just under 7%.

As reported last week, however, Manatee County closed 40.3% more single-family homes in November 2020 compared to November 2019. Nationally, the single-family home market rose 25.8% in November 2020 compared to November 2019.

And, as far as home prices, the NAR has reported that the median existing home price rose 14.6% in November from a year earlier to $310,800. Manatee County’s median home sale price in November was $350,700, up 7.2% from a year earlier.

As usual, the biggest problem we – as well as the entire nation – have is a lack of inventory. Nationally, the NAR reported that the supply of homes on the market at the end of November was the lowest on record going back to 1982. At the end of November, Manatee County had only a 1.6 month supply of available single-family homes; nationally the number was 2.3 months’ supply, which probably accounts for the national number of sales being higher than our area.

Unfortunately, while we are still subject to the fear of contracting the virus, many homeowners don’t want to put their homes on the market, especially in the northern part of the country where they struggle with cold weather. We in Florida have a significant advantage because of warm temperatures and what is typically a good selling season, but will that improve the available inventory? We don’t know at this point.

With the hope of an influx of people flocking to our beaches and looking for a property to purchase, I did a little survey of where exactly new buyers are migrating from. The result was a surprise to me and may be to you as well.

I focused on the approximately six-week period from Nov. 1 through Dec. 15, based on sales recorded on the Manatee County Property Appraiser’s Office website. Most recorded sales show former addresses for new owners.

The city of Anna Maria had nine sales to Florida residents: Five from Tampa, one from Lakeland, one from Miami Beach, one from Eustis and one from Doral. There were two sales from Illinois, one from Oklahoma, one from Georgia, one from Tennessee and one from Arizona.

The majority of the combined cities of Bradenton Beach and Holmes Beach’s new residents came from the state of Florida; eight from Tampa and eight from Sarasota. There were two from Illinois, two from Georgia, two from New York and the balance split between Pennsylvania and Ohio.

Cortez had sales to new homeowners from Tennessee, Massachusetts, Florida and New York, one for each state.

I was somewhat surprised by this little survey. I just assumed that more people were moving here from the northeastern states, but even the New York sales were not from the city of New York. I guess Florida’s east coast is accommodating these new residents.

Statistics are a funny thing; you can interpret them in a variety of different ways, but there is no way to misinterpret our level of inventory. It’s low all over and unless and until that number improves, we’re headed for a slow-down. Stay safe.

Castles in the Sand

Is your dream a vacation home?

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

Owning a dream vacation home is kind of like owning a dream boat, until you actually own one. The idea of it is so exciting that you spend hours every day looking at what’s available to buy. You imagine yourself lounging away the day with little to do but enjoy the best decision you ever made. Well, guess what – it’s not that easy when stuff happens.

There are 7.5 million second homes in the United States, and for many of those millions of homeowners, their second homes have been an escape during the COVID-19 pandemic. But during normal times, owning a second home can become a burden as much as an escape.

Anna Maria Island (and the surrounding waterfront property in Manatee County) is one of the most popular regions in the state of Florida to buy a second home. Our beautiful beaches, pristine water and island charm have been attracting people from around the world for decades. However, owning a vacation property also comes with a litany of problems, especially if yours is set up as a rental property as well.

If you’re renting your property when you’re not using it or are just having someone oversee it while you’re not there, get ready for phone calls. Broken and leaking appliances, roof leaks, mold, air and heating equipment malfunctions, termites and who knows what other critters who may decide to invade your nice, quiet home while no one is there are just a few of the potential issues. And, of course, the Florida curse of hurricane season, where for almost half a year you will hold your breath and stay glued to the Bay News 9 weather cones.

Owning a vacation property has as much to do with your financial ability as it has to do with your personality. If you like being free and exploring different and varied places around the world, going back to the same beach house every year can make you feel stifled and unimaginative.

If your personality is one where you want everything working properly all the time with nothing out of place when you arrive, better rethink your decision. No matter how hard you try, something will go wrong, whether you’re renting your property or not, so maybe you’re better off being the one who rents, keeping your stress level down.

If, however, you’re pretty easygoing and want to find a second home for your family to return to every year and create memories, then a second home will fit your personality and lifestyle better. Getting involved in the community and making friends with local shop owners and restaurant owners will not only enhance your second home experience, it will also give you someone to fall back on if you have a problem getting local repair people, landscapers and housekeepers. Make it more than just your second home, make it part of your life.

If renting your second home is part of your plan in order to offset expenses, consult with your financial and tax advisor. As we know, tax laws have changed in the last couple of years and some of that may affect your personal tax position and frequency of personal use. Unless you live near your second home, hiring a property manager to handle rentals as well as maintenance will make ownership a lot less stressful. Many homeowners successfully use websites like VRBO and Airbnb for their rentals, but that requires being more hands on than you may want to be.

So, should you buy a second home for Christmas? There is a multitude of pros and cons involving finance and personality. Be honest with yourself, because, like owning a boat, owning a second home may not be that exciting once you get off the lounge chair. Stay safe.

Castles in the Sand

National real estate markets better than ever

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

The first big holiday of the holiday season is behind us. We’ll find out soon if it results in more COVID-19 infections and will be thankful if we all came through it healthy. What we also need to be thankful for is the health of the nation’s real estate market, which is shockingly better than anyone would have thought in March.

National home sales rose to a 14-year high in October, representing the fifth straight monthly increase. Economists credit this phenomenon to both the super low cost of mortgage borrowing and the shift in lifestyle preferences resulting from the pandemic. This is one of the best stretches for the housing market in several years, accelerating what was an already good market before the pandemic.

Mark Zandi, chief economist at Moody’s, commented that “In the pandemic, nothing has been more positively surprising than single-family housing.” He goes on to say, “This is a fundamental shift in housing preferences.” Families and singles are leaving large cities and purchasing single-family homes despite soaring home prices.

According to the National Association of Realtors, existing home sales rose 4.3% in October from September, and 26.6% from October this year compared to October last year. As a comparison, Manatee County single-family home sales increased by 48.4% from last October to this October as reported in last week’s column, almost double the national average.

In addition to a shift in lifestyles because of the pandemic, buyers are aided by mortgage rates now at their lowest level since Freddie Mac began tracking them in 1971. However, low interest rates are being somewhat offset by an increase in home prices and shortage of inventory making it very challenging for first-time buyers to get into the market. This shortage of inventory could worsen in the coming months as COVID-19 cases increase, since some sellers will not place their homes on the market for fear of infection. This is especially true for older homeowners who may be ready to downsize but will not allow buyers or realtors in their homes.

New home construction is also benefiting from the busy real estate market. The S&P Homebuilders Select Industry index is up 24.2% this year. In addition, single-family home rentals are also increasing quickly, with families wanting a way out of crowded areas quickly. Overall, a good real estate market always increases consumer spending in general. Appliances, furniture, landscaping and a variety of decorative and other home goods benefit from people moving from one location to another and purchasing or renting new properties.

Like all new events in our collective lives, the pandemic has produced unique contingencies to real estate contracts and buyers desperate for homes are going for it. Some of the more unusual contingencies I’ve read about include people who want to leave their pets with the house when they either can’t take them to their new location or they just feel it’s better for their pet to remain in familiar surroundings. Surprisingly, some buyers will agree to this especially if they’re pet lovers to begin with. Also, there’s crazy stuff like outdoor decorations and loved one’s ashes that can’t be removed, and home visits to pet graves in the yard the sellers are leaving. Most of these requests can be worked through without becoming part of the actual sales contract but it is just another oddity of what may well become the year none of us will ever forget.

As we look forward to Christmas and try to find a way to navigate through a reduction of festivities, we can at least be encouraged by the flourishing real estate market. But be prepared if the seller you’re negotiating with wants Santa on the front porch as a permanent contingency. Stay safe.

Castles in the Sand

Real estate markets upturned

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

The old rules governing a buyer’s and a seller’s market have been seriously adjusted in the time of COVID-19. Areas of the country where they never dreamed of running out of inventory and integrating buyers from major cities are still trying to figure it out while at the same time welcoming their good luck.

Realtor.com, after interviewing over 50 real estate agents in specific markets, has come up with the 10 top buying and selling markets nationwide. This analysis reflected closed sales for upper-end homes at $1 million or over.

A buyer’s market is something that we’re not remotely in right now in the Tampa Bay area, but since you never know when markets will turn, let’s establish some guidelines. The definition of a buyer’s market simply is one with more supply than demand. Santa Barbara County, California was at the top of the buyer’s market list with Santa Cruz County, California coming in at number 10. Florida had two counties on the list, Pinellas at number two and Collier at number four. Remember we’re talking about sales at $1 million or over.

A seller’s market is, of course, the opposite of a buyer’s market, defined as a market that has more demand than supply, with low levels of inventory and appreciating sales prices. Fairfax County, Virginia is at the top of the seller’s market analysis with Suffolk County, New York at the bottom. Florida has two counties on the top 10 list, Hillsborough County (Tampa) at number six and Broward County (Ft. Lauderdale) at number seven. Seller’s markets in this COVID cycle are typically suburban areas close to big employment centers that offer larger homes, property with office space and new construction.

Manatee County is certainly in a seller’s market, so potential buyers need to be cautious not to get in a bidding war and consider making an offer with an escalation addendum. Also eliminating all home sale contingencies like a mortgage will certainly put you in an advantageous position.

Now it’s time to review the October Manatee County sales statistics, reported by the Realtor Association of Sarasota and Manatee, to determine if October’s numbers are as good as September’s were.

Single-family sales numbers compared to October of last year are as follows: Closed sales, up 48.4%; median sale price, $360,000, up 10.4%; average sale price, $481,349, up 20.7%; median time to contract, 18 days, down 58.1%; month’s supply of available properties, 1.8 months, down 45.5%; pending inventory, up 44.5% and cash transactions, up 53.6%.

Condo sales numbers compared to October of last year are as follows: Closed sales, up 39%; median sale price, $255,000, up 34.2%; average sale price, $294,595, up 13.2%; median time to contract, 41 days, up 8.9%; month’s supply of available properties, 2.6 months, down 36.6%; pending inventory, up 71.9% and cash transactions, up 10%.

Not only were the October numbers as good as September, they surpassed them in almost every area. The market is indeed soaring in both Manatee and Sarasota counties, and where this merry-go-round stops, I don’t think anyone knows, certainly not me.

The old adage, “All real estate is local,” has been a little upended this year. However, the principals are the same and we’ll eventually fall back into a normal market. Have a happy and safe Thanksgiving.

Castles in the Sand

Florida is new home to thousands

Written by Louise Bolger on . Posted in Business, Castles in the Sand.

When I moved to Florida 23 years ago, I honestly thought I was at the end of the world. During my dog’s 11 o’clock walk, the brightness of the stars was so overwhelming, I would ask the dog, “Where have we moved to?” Since he had no opinion, I just needed to move on and get to know this new foreign place with its laid-back culture and clean air.

Now after all of these years, I not only appreciate where I am but love it as well, and apparently many others are also. In September, it was reported by the Miami Herald that approximately 950 people a day are moving into the state of Florida, a startling number. Most are from the Northeast and other congested COVID-19 hotspots around the country, and for many, this is not a second temporary home to escape to; it’s permanent.

Florida is not alone with the influx of new residents – many small cities and towns are being overwhelmed with new, well-heeled residents buying up any and all available properties, pushing up values and depleting inventory. Most of them are looking for wide-open spaces, larger homes and a safe and friendly environment. Even younger people who have been forced to leave big cities because of COVID-19 or job loss are reconsidering a more peaceful lifestyle from the high life they originally moved to the cities for, most of which has been eliminated for the foreseeable future.

Home sales in Manatee County are at an all-time high, as well as in the rest of the country. Nationally home sales rose 2.4% in August from a month earlier, increasing the 24.7% surge in July which was the strongest monthly gain ever recorded going back to 1968, according to the National Association of Realtors. None of this is expected to change soon. The Federal Reserve says it expects to hold rates low for at least three more years. Large numbers of Americans will continue to work from home even after a vaccine is developed, and even if sales volume begins to taper off in late 2020, it’s unlikely to diminish too much, according to economists at Zillow.

The end result of this is a shortage of homes which we’ve been talking about for some time, pushing up competition and increasing housing prices. Even with the historic low mortgage rates, the increase in sale prices is canceling out the purchasing power of buyers trying to keep up. Some buyers and their representatives are offering an escalation clause in their purchase agreements. This protects a buyer’s offer in the event another potential buyer comes in over their offer by automatically adding an agreed-upon percentage over the new offer.

It sure looks like people are still pouring into our state, and why not? The Northeastern cities are having serious financial problems and high unemployment with smaller populations and much higher budgets and taxes. Florida’s unemployment rate in August was 7.4% – incredible progress considering April’s was 13.8%. Now with the state opening up almost completely, that number will likely be lower going forward.

Florida is looking more and more like a utopia every day. Certainly gone is my end of the world view. So, watch out for those out-of-state plates and listen to your canine friends; they get it. Stay safe.